Foursquare Launches New Ad Product That Hopes To Serendipitously Pull People Into Stores

For the longest time, people have said mobile phones would revolutionize local advertising. Specifically, they've described serendipitous moments where we'll walk by a Dunkin Donuts and BAM! Our phones buzz with the very ad for a Chocolate Coolata we were craving.

While Foursquare's new advertising product isn't quite that intrusive, the technology will function in a similar way.

Today, Dennis Crowley's location exploration startup launched Foursquare Ads, a platform where more than 1.5 million small businesses can log on and target users who are nearby their shops.

It will work like Google Adwords but instead of buying search terms, advertisers will be buying geo-location data in the hopes of pinging a potential customer just at the right moment.

"Your Google Glass isn't going to light up when you walk by a store," Foursquare's Noah Weiss told Business Insider. "But when you open up your phone and you're using Foursquare Explore, then yeah, we have a lot of signals that tell us whether or not you'd want to go inside. Hopefully, it will feel serendipitous."

Here's how it works:

An advertiser chooses a monthly budget to spend with Foursquare. Foursquare has a minimum spend of $50 per month, but an advertiser can cancel at any point in time if it is unhappy with the service. Yelp, by comparison, makes advertisers commit to a six month spend. In Foursquare's test period with 800 small businesses, it found advertisers were spending $100-300 per month.

The budget is dwindled away on a cost-per-action basis. That means, an advertiser doesn't pay Foursquare if a user merely sees an ad. The advertiser only pays if someone either clicks to learn more about the store or interacts with the store later on the app by checking-in, for example.

Ads will show only on the Foursquare app or website. That means users won't be bothered on their phones with alerts if they aren't already using Foursquare's app. Also, the technology behind Foursquare ads works well across devices because users are often always logged in. That means, Foursquare's technology can tell when an ad is viewed from a desktop computer then converts into a mobile action later on.

Foursquare isn't making advertisers monkey around with a lot of targeting tools they need to toggle. Weiss says its technology is good enough to know when a user is primed for a particular message. Foursquare knows if it's breakfast time that a person who's out and about might want a brunch promotion. It knows if a user is walking around versus driving, and to send them appropriately distanced promotions.

"How much work do these local businesses really want to do?'" Weiss asks. "What level of effort do they want to put into [mobile advertising]? They are in the business of running a store, not being an online marketer. We've moved away from conventional models. They have to do a lot of work on Google setting up geo-fences and keywords. We use all our algorithms that power Explore [to make their jobs easier]."

In addition to this small business platform, Foursquare is also running advertising campaigns with larger brands. Its Chief Revenue Officer Steve Rosenblatt said earlier this year that brands were buying 9-figure campaigns with Foursquare.